Sino Oil and Gas Holdings, a mainland coal bed methane (CBM) projects developer 12 per cent-owned by billionaire Richard Chandler's Mandolin Fund, has slowed the pace of well-drilling to improve sustainability of future output.
The firm, which has a joint venture project with PetroChina in Sanjiao, Shanxi province to extract CBM - a natural gas that adheres to coal seams - will extend the time needed to remove water, known as dewatering, from its production wells from six months to one year, said chief executive Harry King Hap Lee.
'This will allow gas production levels to be more stable in the long term,' said King, adding the decision was made on the recommendation of PetroChina's engineers. PetroChina is the nation's largest developer of unconventional natural gas, which includes CBM. Conventional gas, pumped from sandstone structures, is easier and less costly to extract than unconventional gas.
Before CBM can be extracted economically, large amounts of water trapped in pores and fractures of coal beds need to be extracted, so as to lower the pressure for the methane gas to be released.
King said the venture's drilling timetable will also be extended by six months for future wells. It has drilled 33 multi-lateral horizontal wells in this year's first half. Each cost about 10 million yuan (HK$12.2 million) to drill.
Before the 70 per cent stake in the venture was acquired by Sino Oil and Gas last November, the seller, Beijing-based Orion Energy Holding, had drilled 19 wells since exploration began in 2006. Orion is majority-controlled by Sino Oil and Gas vice-president and chief geologist Yang Luwu, and part-owned by King.
